Exclusive: Sun Capital wants to buy Hostess

Hostess may have a buyer.

FORTUNE -- Private equity firm Sun Capital Partners wants to buy bankrupt bakery Hostess Brands Inc., Fortune has learned.

The proposal would be to operate Hostess as a going concern, including reopening the shuttered factories and continuing union representation of Hostess workers.

Sun Capital privately expressed interest in acquiring Hostess earlier this year, but the bakery's creditors chose for an alternate reorganization plan that ultimately failed. Following Friday's liquidation, Sun reengaged by contacting Hostess advisor Perella Weinberg Partners. It also plans to contact the relevant labor unions.

"I think that we could offer a slightly better, more labor-friendly deal than what was on the table last week," says Sun co-CEO Marc Leder, in an interview with Fortune. "We also think that one point the unions have made is that there hasn't been a great amount of reinvestment in the business. We've found that investing new capital into companies like this can be very positive for brand, people and profitability... We would look to invest in newer, more modern, manufacturing assets that would enable the company to become more productive and to innovate."

MORE: The end of Hostess

Sun's earlier proposal would have maintained the existing lenders -- led by Silver Point Capital and Monarch Alternative Capital -- and would expect to do the same this time around. But Sun also believes that it could "make the company immediately profitable on an EBITDA basis," which could open the door for the current lenders to exit and new ones to step in.

Leder also thinks that Hostess would be a relatively easy company to restart, particularly given that most of its vendors still have empty shelves where Hostess products used to reside. Moreover, he doesn't buy the argument that Hostess is a long-term loser due to the changing American diet:

MORE: Don't worry, Twinkies will survive

"Do you see M&Ms or Mars having any trouble? Or Haagen Dazs or Godiva? People like to indulge in desserts. Obviously you don't eat only Twinkies for breakfast, lunch and dinner, but people love them as a snack."

Sun Capital is based in Boca Raton, Fla. and focuses on companies with significant challenges (including those in bankruptcy). It currently is in the process of raising $3 billion for its sixth fund. Notable portfolio companies in the food and beverage space include Contessa, Creekstone Farms and Harry's Fresh Foods.

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Next Twinkie Maker: Will A Mexican Billionaire Family Buy Hostess' Orphaned Brands?

Hostess sweets have tempted the sugar-starved among us for more than eight decades. Now, the company is going out of business. That moves the focus on Hostess’ brands—Twinkies, Devil Dogs, Wonder Bread, Ho Ho’s, to name a few—from the store shelf to the auction block.

It seems quite plausible that the next Twinkie maker could be a Mexican company run by a billionaire family.

Parting Such Sweet Sorrow: Twinkie Maker Hostess To Liquidate, Layoff 18.5K WorkersAbram BrownForbes Staff

Finding Mexico's Missing BillionairesKerry A. DolanForbes Staff

Snapshot: Daniel Servitje Montull & family

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• #310 Billionaires

Meet Daniel Servitje Montull. He and his family are worth more than $4 billion by our tally. Servitje runs Grupo Bimbo, a publicly traded bakery concern that ranks as the world’s largest bread maker. (Seated close to Servitje is his uncle, Don Roberto, and his father, Lorenzo. Papa Servitje founded Bimbo with three others in 1954.) Daniel Servitje assumed control of Bimbo in 1997, setting the company on a course of rapid growth. This included a battle with Mexico‘s tortilla don; positioning white bread in Latin American markets; and careful management of Bimbo’s fleet of white delivery vans.

A period of substantial expansion—profits doubled and revenue more than tripled—that also included several flirtations with buying Hostess.

Acquisitions are at the very center of Bimbo. Indeed, Bimbo has gobbled up companies, and this was initially confined to South America. Servitje, a thin man with deeply set eyes, worked to extend Bimbo’s reach from Mexico to the tip of South America, in Patagonia. Thereafter, his attention turned north. He bought Mrs. Baird’s Bakeries of Fort Worth, Texas for $200 million shortly before 2000, then Heiner’s and Earth Grains. And just last year, Bimbo bought the U.S. bakery business ofSara Lee Co. for $709 million, as well as the Spanish and Portugal portions in a separate transaction.

Today, Bimbo is a $10 billion sales business with $200 million in cash on its balance sheet.  By contrast, Bimbo posted $3 billion in sales a decade ago; annual profits have more than doubled to roughly $400 million. It competes with U.S. companies like Kellogg, Hershey and General Mills, and with privately held operations such as McKee Foods, the maker of Little Debbie’s snacks. (Other Hostess suitors include Flowers Food, the company behind Nature’s Own, according to SunTrust.) Supermarkets stock Bimbo staples like Entenmann’s and Thomas’ English muffins. And, significantly, the Sara Lee acquisition suggests that Bimbo’s appetite for U.S. bakeries is hardly satiated.

So, perhaps Twinkies will take their place in Bimbo’s white vans. (A FORBESemail to a Grupo Bimbo spokesman was not immediately returned.) Bimbo tried once before to seize Hostess. It teamed up with a Hostess union and an U.S. investment firm, billionaire Ron Burkle’s Yucaipa, to form a competing bid during Hostess’ first trip through bankruptcy in 2007.  That eventually fell apart. Bimbo backed out, and Yucaipa went ahead and entered a fruitless offer, valuing Hostess at $580 million. Hostess’ business has gone staler since, the product of unfunded legacy pensions, leverage and labor strikes.

But even before 2007, Bimbo seemed sweet on Hostess. In the early 2000s, analysts widely speculated that Bimbo thought Hostess a key ingredient for North American expansion with delivery routes that penetrated across the country into convenience stores, gas stations and grocery markets. Bimbo publicly stated that it was shopping in 2000, and analysts widely speculated that Interstate Bakeries—the Hostess parent then facing three straight years of losses—would fall to Bimbo.

Today, with a taste still for American companies, Bimbo may just bite.

Reach Abram Brown at abrown@forbes.com.

Daniel Servitje Montull & family

NOTIMEX/FOTO/CARLOS PACHECO/CPP/HUM/Newscom

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Daniel Servitje Montull

Daniel Servitje Montull, director general de Grupo Bimbo, presenta la conferencia ìEl reto de los negocios hoy en dÌa: Grupo Bimbo y mi experiencia personalî, durante el congreso ìReto Negocios, UDLAP 2011î en la ciudad de Puebla. (NOTIMEX/FOTO/CARLOS PACHECO/CPP/HUM/Newscom)

Don't worry, Twinkies will survive

Someone will buy America's favorite indestructible snack.

FORTUNE -- Twinkies are going to be around for a long time to come. And not just because they're thefoodstuff of choice for the zombie apocalypse.

Yes, Hostess Brands today began liquidation. Yes, all of the bakers lost their jobs (they weren't willing to make a deal). So did the delivery truck drivers (they were). And it's true that the last batches of Hostess Brand(ed) treats were sent out last night, and the ovens were fired down.

But that doesn't mean that Twinkies are gone forever, despite the sugar scare tactics of websites like HuffingtonPost:

What else would you expect from a news source that includes a "healthy living" vertical?

The truth is that the Twinkies brand still has value, and will be acquired. Same for Ding Dongs. And (probably) Wonder Bread. America may be undergoing major demographic shifts, but empty calories cut across age, gender and ethnicity. If the next generation's Twinkies don't have "Hostess" stamped on them, so be it. I'm not even certain the ironic heart carries much weight in our post-Saturday morning cartoon world.

The most likely endgame here is that another bakery snaps up Twinkies, and separates it from the Hostess snack brands (which include Drake's Cakes). There also is a small chance that private equity tries to buy the whole thing, now that it would be free of existing pension liabilities. Again, I don't think it's likely, but here would be my frontrunners:

• KPS Capital Partners. They didn't seem to express much interest over the summer when Hostess was flailing, but it is a turnaround firm with recent experience in the food/beverage packaged good sector (okay, it was beer). KPS also has a history of working with organized labor, including The Teamsters (including on the beer deal).
• Sun Capital Partners: Probably the country's most active turnaround firm, and also one with a small packaged foods practice. Sun Capital also is raising $3 billion for its new fund, so capital wouldn't be an issue.
• Invus: These are the guys who turned around Keebler, which eventually went public before being acquired by Kellogg's (K).
• Lion Capital: This is a moonshot among long-shots, but I'd be remiss in not including Lion as part of any list of private equity firms on a food deal. Kettle chips, Bumble Bee tuna, etc. My hesitance relates to Lion's tendancy to avoid distressed plays.

KPS declined to comment, and I haven't yet heard back from the other three firms.

But, again, don't worry about Twinkies. After all, there was enough demand last year to make 500 million of them. Someone will buy it, and they'll look exactly the same. Even if someone besides Hostess is making them.

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Who Killed Hostess Brands and Twinkies?

I’m sure you have, by now, heard the news. Hostess Brands, the company that gave us such remembered childhood treats as Twinkies, Ding Dongs, Devil Dogs and other baked foodstuffs that have fallen into disfavor in our more gourmand age, announced today that it would be closing for business, effective immediately.

Box of Twinkies (Photo credit: Wikipedia)

More than a few observers say they know who to blame for the demise of the iconic company: the Bakery, Confectionary, Tobacco Workers and Grain Millers International union, which represents thousands of striking Hostess Brand workers who have refused to accept a new contract that would do everything from slash their salaries to their retirement benefits.

Next Twinkie Maker: Will A Mexican Billionaire Family Buy Hostess' Orphaned Brands?Abram BrownForbes Staff

Hostess With The Most-est? No Wonder That These Twinkies Will Not Join The Trademark Graveyard!Jess CollenContributor

Time for a reality check.

Hostess has been sold at least three times since the 1980s, racking up debt and shedding profitable assets along the way with each successive merger. The company filed for bankruptcy in 2004, and again in 2011. Little thought was given to the line of products, which, frankly, began to seem a bit dated in the age of the gourmet cupcake. (100 calorieTwinkie Bites? When was the last time you enteredMagnolia Bakery and asked about the calorie count?)

As if all this were not enough, Hostess Brands’ management gave themselves several raises, all the while complaining that the workers who actually produced the products that made the firm what money it did earn were grossly overpaid relative to the company’s increasingly dismal financial position.

Watch - Twinkies Talk: Hostess Isn’t Hopeless

So now an estimated 18,500 workers will join the nation’s unemployment rolls. But while Hostess Brands might soon become a forgotten name from the past, it’s unlikely such a fate awaits such signature products as Twinkies. Company executives have already asked for bankruptcy court permission to begin the process of selling off their famed product lines to other companies.

Finally, a personal note: A few years ago, my husband picked our children up from a playdate at a home where, he said, it seemed like more food was banned than allowed, there was no television, and it was all too politically correct in the way all too many middle class childhoods are today. My husband’s response? Before bringing the boys home, he stopped in at a local grocery and introduced our ecstatic children to fine products of Hostess Brands. “Yodels,” he told me, “never tasted so good.”

Addendum: Since this has come up in the comments, I need to remind everyone that Hostess Brands acquired Drake’s Cakes in one the many of the misbegotten mergers it was involved in.

Related on Forbes:

5 Brands Most Likely To Be Gone By 2015

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Brands Most Likely To Be Gone By 2015

Prophet recently conducted a spot survey of some 5,000 U.S. consumers to see which brands they’d put on the deathwatch for anytime between now and 2015.

Twinkies dicen adiós a EU

La producción de Twinkies y pan Wonder se suspenderá frente al cierre de sus fábricas y la venta de sus activos, esto tras haber presentado su bancarrota

El fabricante de los pastelillos Twinkies y el pan Wonder, Hostess Brand, anunció que cerrará sus plantas en Estados Unidos y pondrá sus activos a la venta, lo que significará la pérdida de su empleo para 18,500 personas.

Ubicado en Irving, Texas, Hostess afirmó que una huelga de trabajadores en todo Estados Unidos lo obligó a suspender la fabricación y distribución de sus productos.

La firma es uno de los principales fabricantes de pan industrializados en Estados Unidos, junto a Grupo Bimbo, Flowers Foods, McKee Foods y George Weston Limited.

Hostess ya había advertido a los empleados que presentaría una moción ante el Tribunal de Quiebras de Estados Unidos para cerrar gradualmente su negocio y vender sus activos en caso de que sus operaciones en plantas no volvieran a niveles normales para el jueves por la noche.

La empresa se acogió en enero al Capítulo 11 de protección ante acreedores por bancarrota. Fue su segunda solicitud a una corte de quiebras en menos de una década.

Con información de AP.

Por: Redacción